Alfonso Lobianco wanders through his olive grove in Chianti, Italy, surveying the scorched landscape. "It's not good," says the organic farmer as he picks some of the shrunken fruit off the ground. "Everyone is worried this year for oil production."

Lobianco's concerns are being echoed far beyond the Tuscan hills. Across Italy, Spain's Jaen province, Germany and southern France, farmers are facing an economic crisis the unrelenting heat of the hottest summer for 500 years has destroyed century-old olive orchards, damaged tomato crops and slashed production of durum wheat, the key ingredient in pasta.

The knock-on effect will be global, with farmers' unions predicting that shortages could see shelf prices of imported goods to Australia in particular, extra virgin olive oil rise by 30 per cent.

Food purveyor Simon Johnson believes some producers are using it as an excuse to increase prices. "The drought in Europe is not good for a lot of farmers. However I've spoken to most of my olive oil producers and they are expecting a good season," he says.

"I spoke to Eduard Pons last week and he is No. 1 in the export of quality oil from Spain. He did say there is a shortage at the moment but he was looking forward to the new harvest."

According to Johnson, the shortage is pushing prices up now but when the new season's oil flows it will be back to normal.

Britain has already felt the effect of the cut in production. The price of a loaf of bread increased by nine pence (22 cents) last month and in London, fruit and vegetables including lettuce, tomatoes, broccoli, peaches, plums and potatoes have risen by as much as 25 per cent.

In Italy, late October traditionally marks the beginning of harvest time in Tuscany and Umbria, when the olives are still solid and green. But this year's harvest has started early with farmers such as Lobianco stripping fruit from the trees already. Some of his trees had no olives at all this year. On others, the olives are so small they are not worth picking.

"It is really difficult to express quantities now," says Lobianco's wife, Maria. "We won't sell it this year. There'll be enough just for our families, Christmas presents, some oil tasting occasions and we have a restaurant. That's all.

"We will produce very small quantities. It has been too hot during the summer and oil will be very expensive, probably 30 per cent more than last year."

Italy's biggest farmers' union, Coldiretti , says it will take years for farmers to recover from this drought and this season's shortage could also fuel next year's price increases.

Olive production has been slashed by 50 per cent, the wheat harvest by 13 per cent and the tomato crop by 7 per cent, the union says.

But where some people suffer, others profit. Peter Bradica, from Eden Valley olive grove in north-west NSW, is hopeful that the shortage will be a bonus for local olive oil producers.

"People will always opt for the imported stuff over Australian," he says. "Imported oils manage to get onto Australian shelves currently at a lower price than Australian oil ... and consumers normally shop for the best price."

If the shortage drives up overseas prices, then Australian oils will be more attractive to shoppers. The last time Australian oils struck gold was 1995, when a Mediterranean drought caused a global shortage and olive oil prices jumped to a record high.

But like Europe, Australia has experienced its own problems with drought. "It was a case of quality not quantity this year for us," says Bradica.